After a few cold ones I’m often stricken with some epiphany that I must ultimately classify as one of those ‘Mysteries of the Universe’. In the present case, I’ve been unable to find anywhere within Title 26 (Internal Revenue Code) where a “promissory note” in and of itself is taxable. The “income” from a promissory note is certainly taxable since “income” is defined in the Internal Revenue Code as ‘gain’ or profit, but not the face value of the note itself.
This is confirmed by quickly reviewing the operations of banks – some of the greatest generators of “promissory notes”. The tax code doesn’t tax the notes themselves (mortgages and loans on their books) but on the “income” they derive from the notes, right? Likewise, in the case of a bank (savings) account, every year you’re taxed not on the balance/value of the account itself but on the revenue (interest) it derives.
This poses a potential conundrum for me (and perhaps you), so let’s think about this for a moment. Here’s the rub; if the income or gain from a promissory note is taxable but not the note itself then why is my paycheck allegedly, “taxable”? When someone writes me a check for services, the only thing I can ‘get’ from that check is Federal Reserve Notes. A Federal Reserve Note is nothing but a “non-interest-bearing promissory note”, issued by a private bank, under Title 12, Section 411 of the United States Code, which means there can be no “interest” (or gain) derived from possessing it. Now, while this same section of code alleges these debt instruments are redeemable on demand for “lawful money” and while “money”, is (elsewhere) lawfully described as “dollars” which are defined clearly as 31.103 grams of silver (1 troy ounce) that is .999 fine, the federal government, as we all know, passed law which refuses to “redeem” these promissory notes for anything but more Federal Reserve (promissory) Notes.
So, back to my dilema. Nothing in Title 26 (Internal Revenue Code) claims that one is taxed on possession of a “promissory note” or a debt instrument, especially one which is defined, by statute as a “non-interest bearing”. Therefore, how can one construe Federal Reserve Notes (as a medium of exchange) in payment for services is “income” when it’s defined in law as a non-interest bearing debt instrument? How can I be lawfully taxed on a “promissory note” when the banks are not taxed on the face value of promissory notes or debt instruments that they (daily) issue and hold on their books? Rather, as stated above, taxes are owed on the “income” that is eventually derived from the transaction involving them. Since my ‘revenue’ (and yours) is calculated and paid in these Federal Reserve Notes, which are, in fact, promissory notes or debt instruments resulting in no interest or “income”, how can my revenue (or yours) be taxable?
As you ponder this, I’m off to relocate my tin-foil hat and continue my musings.